Winston Churchill and the welfare state

In the American Scholar, George Watson writes about the forgotten Churchill — the Liberal who helped lay the foundations for Britain’s welfare state. Churchill was president of the Board of Trade in the Asquith government — a Liberal government that favoured free trade, a more regulated labour market and a government run system of social insurance. As Watson observes, it was not socialists or social democrats who conceived the welfare state:

In 1908, when Asquith became prime minister, there were almost no models of state welfare anywhere on earth. The exception was Bismarck’s Prussia, which to the dismay of German Social Democrats had instituted compulsory health insurance in 1883. That created a sudden panic on the left. Karl Marx had died weeks before, so the socialist leader August Bebel consulted his friend Friedrich Engels, who insisted that socialists should vote against it, as they did. The first welfare state on earth was created against socialist opposition.

By the new century Prussia was setting an example. Lloyd George and Churchill, as members of Asquith’s cabinet, went there to watch state welfare in action; Churchill, the more studious of the two, read published reports. In 1909 he collected his speeches in Liberalism and the Social Problem, where he made a case for seeing state welfare as an essential prop to a free economy. The Left had good reason to fear it, as he knew. Welfare promotes initiative, initiative promotes growth, and “where there is no hope, be sure there will be no thrift.”

While he supported free markets, Churchill rejected the idea that state intervention necessarily undermined self reliance. Many of his policy ideas would be considered left wing today. For example, in Liberalism and the Social Problem he argues that government should run job creation programs during recessions. "There is nothing economically unsound in increasing temporarily and artificially the demand for labour during a period of temporary and artificial contraction", he insisted.

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Pedro
Pedro
10 years ago

I wonder whether we’ve learned anything by the experience?

jtfsoon
jtfsoon
10 years ago

I somehow doubt that Churchill, Bismarck or even Beveridge would have approved of the high rates of welfare dependency and reach seen today, however. After all, Hayek approved of a government funded ‘social minimum’ too, as did Friedman. It is a pretty trite point that classical liberalism and support for free markets is not inconsistent with conceding that ‘non market’ concerns could be met by tax and transfer

wizofaus
wizofaus
10 years ago

Jason, I don’t think *anybody* approves of high rates of welfare dependency. The worthwhile question is what can we do about it that a) is effective and b) doesn’t unfairly punish those who have no realistic control over their circumstances. Suggestions that involve reducing welfare availability may (on occasion) pass the first test, but often struggle to pass the second.

Gavin R. Putland
Gavin R. Putland
10 years ago

Here’s an HTML version of Liberalism and the Social Problem.

It can be seen that Churchill’s views on land value taxation were also considered left-wing. But he never abandoned them, even after his return to the Tories.

Pedro
Pedro
10 years ago

I guess Georgist tax ideas are just as relevant today as well.

Wiz, but is that not your dilemma, how to give people money in a way that doesn’t impact on their incentive to do without that money? Most effect schemes that I can think off have benefit withdrawal as part of the incentives.

Gavin R. Putland
Gavin R. Putland
10 years ago

Pedro wrote: “Most… schemes that I can think off have benefit withdrawal as part of the incentives.”

Indeed. Unfortunately they also have benefit withdrawal as part of the disincentives.

KB Keynes
KB Keynes
10 years ago

I can’t agree with Watson. Lloyd George went there before Churchill. both were affected by Depressions which were part of the business cycle back then.( Even Bismark was.)
Where Lloyd George walked so did Churchill.

In a quite ironic stage both supported expansionary fiscal policy rather than the orthodox classical economic policy however neither implemented said policy when they were Chancellor of the Exchequer.

wizofaus
wizofaus
10 years ago

Pedro, it’s hardly just my dilemma, but sure – it is an inherently difficult problem. I would think the goal should be to ensure that benefits are withdrawn at a sufficently graduated and moderate rate so that you don’t get situations where earning more pre-tax income can leave you materially no better off (or even in extreme cases, worse off), coupled with active programs to help people into the jobs that give them the best chance of improving their prospects (and ultimately becoming net contributors). But a “one system fits all” mentality isn’t going to work – there are people with special circumstances (disabilities, dependents etc.) for which exceptions have to made, hence any truly effective tax and benefit system is going to complex. The simplicity of concepts of like an NIT or “basic wage” is all very nice and appealing on the surface, but often hide the fact that without more fine-tuning will necessarily mean a significant number of people who least deserve it will end up significantly worse off.

I will also say that the mentality “we should make life harder for bludgers” is unlikely to be particularly helpful in developing fair and effective policies to reduce welfare dependency, much as it may be a perfectly reasonable reaction to those few who are obviously taking advantage of the system – just as, at the opposite end, the mentality “we should make life harder for tax cheats” is unlikely to particularly helpful in developing fair and effective processes to reduce tax evasion (which of course is just as much ‘gaming the system’).

wizofaus
wizofaus
10 years ago

(and FWIW, I do think welfare dependency is a slightly bigger problem than tax evasion even though there are figures suggesting the latter possibly costs the state more, because it is denying a significant number of people a chance for a better life. But effective measures to reduce tax evasion would free up funds that could be used for projects to reduce welfare dependency, so obviously I’d like to see both tackled at once).

Geoff Robinson
10 years ago

Peter Lindert’s work suggests conservative (&Catholics until post-WW 2) definitely not associated with higher social expenditure.

Peter Patton
Peter Patton
10 years ago

Er, the UK Labour Party ALSO said to the liberal/conservative Beveridge Model, right up even to 1946. Things were made a lot sweeter for Bevan by finding bucket loads of US dollars under the Xmas tree from Uncle Same.

Pedro
Pedro
10 years ago

Wiz, I think the answer is the encouragment of personal responsibility, the devil is finding the method.

Peter Patton
Peter Patton
10 years ago

Churchill rejected the idea that state intervention necessarily undermined self reliance.

Churchill was writing of the world of 1909, while Thatcher, for example, was writing of the world of 1979. You do the math:

1. ‘When the facts change, I change my mind. Why, what do you do, sir?’

2. In the 70 years between Churchill and Thatcher, the world changed quite dramatically. No doubt, if Churchill were to have seen 1979, his words would have been identical to Thatcher’s.

wizofaus
wizofaus
10 years ago

And the day we get modern politicians making speeches like that again I’ll start to have some hope for Western democracies recently infected by ‘punish the welfare cheats’ ideology.

Nicholas Gruen
Admin
10 years ago

Winston sure had a good turn of phrase – right back to 1909.

Peter Patton
Peter Patton
10 years ago

Don

If Churchill were to drop out of the sky either into Maggie’s day or ours, he’d pour himself a large whiskey, slap Nicola Roxon with his gloved hand for trying to tax him, look around and say:

Pansies, all of you!

Before promptly halving both the jails and Centrelink queues by….re-opening the loony bins. ;)

Peter Patton
Peter Patton
10 years ago

Nicholas

It’s quite ironic how Winston turned out so damn articulated. He said that while he was a student at Harrow, they introduced a stream for the thickest boys – of whom, he insists, he was the thickest – which involved relieving them of Greek and Latin, studying English instead. I read his several page account of what this involved, and it helps explain his linguistic talents. While all his brainier chums were oohing and aahing over whether or not Greek had an ablative, he and his dummy pals were learning more English linguistics and literature, than any other school room on the planet.

Pedro
Pedro
10 years ago

If you haven’t done so before you should read one of Churchill’s books. The History of the English Speaking Peoples is a good enough choice. The first page is a cracker if you like fine writing.

Don Arthur
Don Arthur
10 years ago

Peter – Here’s a quote you might like: “There is no reason at all why people should wander about in a loafing and Idle manner; if they are not earning their living they ought to be put under some sort of control.”


According to Desmond King
, this was what Churchill said to unionists when he was explaining the role of labour exchanges in dealing with vagrancy and tramps.

Peter Patton
Peter Patton
10 years ago

Churchill was actually a quintessental – what would be later called – ‘neoconservative’ of the pre-Bush/Cheney/Rumsfeld stripe in his emphasis on state responsibility for the poor, otherwise the entire national fabric – and hence most importantly security – frays.

His welfare state support was in the context of existing treatment of the poor via The Poor Laws. I think he would have cheered Mrs. Thatcher selling council estate housing to its existing tenants as a great filllip to the independence of the working classes. OTOH, he could not have been impressed by Labour and council bureaucrats taking the government to the courts to prevent this scandalous ‘bourgeoisification’ of the workers. I’m not sure he would have enjoyed the sight of a significant chunk of the next generation’s kids growing up without ever seeing a parent go to work.

The neoconservatives of the 1960s to 1990s had the benefit of seeing where state activity of this kind could lead. I’m not sure Churchill would have approved very much of the state of his felloww countrymen in the 1970s. Somehow, I think the leadership of Arthur Scargill and Johnny Rotten would not have struck Churchill as up to a task similar to task faced by his Britain of the late 1930s.

jtfsoon
jtfsoon
10 years ago

Well said, PP. The idea that Churchill would have been some kind of bleeding heart ACOSS-Eureka St lefty because he introduced some social insurance legislation is ludicrous. Don’t forget he also approved of eugenics and thought Mussolini was doing a good job.

Peter Patton
Peter Patton
10 years ago

That is, it is crucial not to conflate the welfare state and Socialism. Socialists thought tooth and nail against the construction of the liberal welfare state. Except once it was up and running, the Socialists made damn sure that it was THEY who became the beneficiaries of the working class taxes that paid for their ‘march through the institutions’.

Nicholas Gruen
Admin
10 years ago

Yes, we suffer from the law of the excluded middle around here. Thatcher was to the LEFT of Churchill if you look at the actual policies she would have supported. The share of Government that she would have supported (even if she’d had her way on all things I suspect) would have been well beyond the amount of state involvement that Churchill or anyone else would have backed in 1909. On the other hand Churchill was arguing for an expansion from way too little government and Maggie was arguing for a contraction from far too much – at least as far as the monopolies granted to labour cartels.

KB Keynes
KB Keynes
10 years ago

I would have thought Churchill’s performance during the General strike would have stopped dead in the tracks any thought he was a lefty.

Even the great DLG was a liberal not a lefty per se’

The original thinking of the Labour party was not a welfare state after all Wesleyites were much much into personal responsibility

jtfsoon
jtfsoon
10 years ago

Don
Yes – I thought that was how wizofaus was interpreting it based on his comment no. 15

wizofaus
wizofaus
10 years ago

Jason, not at all – the point is that he *comes* across in that particular speech as a ‘bleeding heart lefty’ precisely because political rhetoric in the last couple of decades has turned so thoroughly nasty.

Pedro
Pedro
10 years ago

friedman at least provided some suggestions, not sure about hayek. I recall the suggestion that benefits should be half the minimum wage.

KB Keynes
KB Keynes
10 years ago

Don,
Indeed Churchil argues social insurance helps the capitalist system.

Pedro
Pedro
10 years ago

“It’s possible that the natural rate of unemployment has risen slightly due to the recent 40% boost in the minimum wage. More importantly, early in the recession the maximum period of unemployment insurance was extended to as much as 99 weeks. Western European countries with similar labour market policies saw a dramatic increase in their natural rates of unemployment during the 1970s and 1980s.”

http://www.economist.com/economics/by-invitation/guest-contributions/america-should-combine-monetary-easing-supply-side-refor

Pedro
Pedro
10 years ago

And the chart in this post is also very interesting
http://www.themoneyillusion.com/?p=5164

Peter Patton
Peter Patton
10 years ago

Don

‘Bleeding hearts’ are most definitely NOT leftists. A ‘bleeding heart’ would be helping the poor through sontributing time to charitable and religious organizations. Marx, Lenin, and Anthony Albanese are ‘bleeding hearts’? Pig’s fucking ass.

Don Arthur
Don Arthur
10 years ago

Peter – Ok. So you’re saying leftists aren’t genuinely concerned about people people who are poor.

Anything else you need to get off your chest?

JC
JC
10 years ago

The point is you don’t have to be a bleeding heart lefty to support policies of social insurance, social assistance and direct job creation.

As jtfsoon says, Hayek and Friedman supported a government funded social minimum. The question is how to decide the level and type of assistance.

So how should we decide?

According to this piece Reagan distinguished between the 30’s FDR policies vs the LBJ policies.

Reagan wanted to keep FDR’s and eliminate the Great Society ones.

The press is trying to paint me as trying to undo the New Deal.… I’m trying to undo the Great Society.
— Ronald Reagan, in a January 1982 diary entry

Peter Patton
Peter Patton
10 years ago

No, I not Don. I am saying that ‘caring for the poor’ is not a centrepiece of left-wing, right-wing, liberal, or candy-striped politics. But in my experience over many years both in formal structures and socially, there is no evidence whatosever to justify the epither “bleeding-heart” to leftists, especially when their record is so consistently to immiserate the poor, which Mr. Churchill would certainly had seen had he dropped into 1970s Britain, as he was experiencing in 1909. Remember, it was the left who was his opposition.

Pedro
Pedro
10 years ago

Perhaps there should be a new Churchill post covering the way parliamentary governments of his and former times would have responded the situation in which the Fed govt finds itself. I dare say Churchill would have resigned and called an election.